Correlation Between Alignment Healthcare and UnitedHealth Group

Can any of the company-specific risk be diversified away by investing in both Alignment Healthcare and UnitedHealth Group at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Alignment Healthcare and UnitedHealth Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alignment Healthcare LLC and UnitedHealth Group Incorporated, you can compare the effects of market volatilities on Alignment Healthcare and UnitedHealth Group and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Alignment Healthcare with a short position of UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alignment Healthcare and UnitedHealth Group.

Diversification Opportunities for Alignment Healthcare and UnitedHealth Group

0.77

Correlation Coefficient

Alignment Healthcare  UnitedHealth Group

Poor diversification

The 3 months correlation between Alignment and UnitedHealth is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Alignment Healthcare LLC and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group and Alignment Healthcare is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Alignment Healthcare LLC are associated (or correlated) with UnitedHealth Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UnitedHealth Group has no effect on the direction of Alignment Healthcare i.e., Alignment Healthcare and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Alignment Healthcare and UnitedHealth Group

Given the investment horizon of 90 days Alignment Healthcare LLC is expected to generate 1.2 times more return on investment than UnitedHealth Group. However, Alignment Healthcare is 1.2 times more volatile than UnitedHealth Group Incorporated. It trades about 0.35 of its potential returns per unit of risk. UnitedHealth Group Incorporated is currently generating about 0.18 per unit of risk. If you would invest  447.00  in Alignment Healthcare LLC on February 3, 2024 and sell it today you would earn a total of  79.00  from holding Alignment Healthcare LLC or generate 17.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Alignment Healthcare LLC  vs.  UnitedHealth Group Incorporate

Alignment Healthcare LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alignment Healthcare LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

UnitedHealth Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UnitedHealth Group Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, UnitedHealth Group is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Alignment Healthcare and UnitedHealth Group

The main advantage of trading using opposite Alignment Healthcare and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alignment Healthcare position performs unexpectedly, UnitedHealth Group can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in UnitedHealth Group will offset losses from the drop in UnitedHealth Group's long position.

The idea behind Alignment Healthcare LLC and UnitedHealth Group Incorporated pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Content Syndication module to quickly integrate customizable finance content to your own investment portal.